Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Barbara is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is

Barbara is considering investing in a company's stock and is aware that the return on that investment is particularly sensitive to how the economy is performing. Her analysis suggests that four states of the economy can affect the return on the investment.

Probability Return
Boom 0.1 25.00%
Good 0.2 15.00%
Level 0.1 10.00%
Slump 0.6 -5.00%

A) Use the table of returns and probabilities above, to determine the expected return on Barbara's investment? (Round answer to 3 decimal places, e.g. 0.076.)

B)Use the table of returns and probabilities above, to determine the standard deviation of the return on Barbara's investment? (Round intermediate calculations and final answer to 5 decimal places, e.g. 0.07680.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Finance Markets, Investments, And Financial Management

Authors: Ronald W. Melicher, Edgar A. Norton

17th Edition

1119561175, 978-1119561170

More Books

Students also viewed these Finance questions

Question

Determine Leading or Lagging Power Factor in Python.

Answered: 1 week ago